Elon Musk neutral expression

Elon Musk agreed Saturday to step down as chairman of Tesla and pay a $20 million fine in a deal to settle charges brought this week by the Securities and Exchange Commission.

Under the settlement, which requires court approval, Musk will be allowed to stay as CEO but must leave his role as chairman of the board within 45 days. He cannot seek reelection for three years, according to court filings.

He accepted the deal with the SEC “without admitting or denying the allegations of the complaint,” according to a court document.

Separately, Tesla agreed Saturday to pay $20 million to settle claims it failed to adequately police Musk’s tweet.

“The $40 million in penalties will be distributed to harmed investors under a court-approved process,” the SEC said in a press release.

The company also agreed to appoint two new independent directors to its board and establish a board committee to oversee Musk’s communications.

Tesla declined to comment. A spokesperson confirmed Musk will be permitted to remain a member of the board.

The announcement from the SEC comes two days after the agency filed a lawsuit against Musk, claiming he misled investors. The suit centers on tweets Musk sent on August 7 in which he said he had secured funding to take Tesla private at $420 a share, causing the company’s stock to soar. He had not secured the funding, the SEC said.

The lawsuit sought to ban Musk from serving as an officer or director of any publicly traded company.

Musk called the SEC’s suit “unjustified.”

“I have always taken action in the best interests of truth, transparency and investors,” he said. “Integrity is the most important value in my life and the facts will show I never compromised this in any way.”

CNBC, citing unnamed sources, reported that the agency filed the suit on Thursday after Musk refused an earlier settlement offer. Under that deal, Musk would have had to pay a “nominal fine” and leave his role as chairman for two years. He chose not to accept the terms because “because he felt that by settling he would not be truthful to himself,” according to the outlet.

A representative for Musk did not immediately reply to CNN’s request for comment Saturday.

Jay Dubow, a partner at Pepper Hamilton and a veteran of the SEC’s enforcement division, said it was “unusual” that the SEC agreed to let Musk stay on as chief executive but exit the chairman role.

It’s surprising considering “the conduct at issue, if [the SEC] really thought it was egregious,” Dubow said. “The CEO is certainly more involved than the chairman in day-to-day operations.”

He suggested the SEC may have determined that removing Musk as CEO would cause more harm to Tesla’s share price, and thus harm investors.

Barclays analyst Brian Johnson estimated in a recent note that Tesla’s stock has a $130 “Musk premium,” which could disappear if he leaves.

Still unclear is whether or not the Department of Justice will file criminal charges against Musk.

Tesla confirmed earlier this month that the DOJ was investigating whether Musk’s comments about taking his company private constituted criminal activity.

Dubow, the former SEC official, said he suspects nothing will come of it.

“My guess is that it’s still possible the DOJ will pursue something, but…it’s more likely than not that the DOJ chooses not to pursue this,” he said.

The settlement has likely assuaged the SEC, mitigating the DOJ’s incentive to act.

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Updated with the SEC’s settlement with Tesla and Elon Musk.

MarketWatch rounds up 10 of its most interesting topics over the past week.

1. Running off at the tweet

Tesla and CEO

TSLA, -13.90%

 Elon Musk have settled with the Securities and Exchange Commission over civil fraud charges springing from his infamous “funding secured” tweet in August, when he said he might take the electric car maker private at $420 a share. The stock closed at $264.77 Friday. Musk will remain CEO of Tesla but will not longer serve as chairman.

Related: Five of the costliest tweets ever

2. This marijuana company follows a Buffett-like strategy

Aurora Cannabis

ACBFF, +7.18%

has booked tremendous paper profits by investing in many other marijuana companies.

More pot coverage:

Aurora Cannabis releases earnings, confirms U.S. listing plans

Marijuana stock IGC soars after entering CBD drink market, defying weaker sector

How to survive marijuana stocks’ roller-coaster ride

3. New S&P 500 sector

Yes, there’s a new sector for the S&P 500 index

SPX, +0.00%

It’s important to most investors.

4. Semiconductor pullback may signal buying opportunity

Despite a tremendous increase in sales for the group, semiconductor stocks have been hit hard by weak guidance from Micron Technology

MU, +0.53%

based in part on President Trump’s tariff policies. This may present an entry point for long-term investors.

5. A warning about stock valuations

The latest increase in interest rates by the Federal Reserve raises a very important question about high price-to-earnings ratios for stocks.

Related: Investors have lost their healthy skepticism, Shiller warns

Also read: Stock investors not only buy the most at market tops but pay more for managers, too

6. Instagram and Facebook

The founders of Instagram have left Facebook

FB, -2.59%

which acquired the messaging application developer in 2012. Here’s a roundup of MarketWatch’s coverage:

Instagram founders leave the company, but are Facebook’s privacy struggles to blame?

Facebook can’t keep up with Twitter, and the Instagram news isn’t helping

Instagram co-founder departures are a ‘notable negative’ for Facebook, says CFRA

Why you should sell your shares in both Facebook and Twitter — now

Facebook likely to make Adam Mosseri new Instagram head: report

How Facebook posts can push people toward conservative economic policies

7. A better ETF strategy

Index fund investors need to read this.

8. Might as well make some money

Jeff Reeves shares five ways you can profit as an investor from climate change.

9. ESG investing isn’t easy

ESG investors want to make the world a better place. As Vanguard enters the fray with some low-fee ETFs, here are other important factors to think about.

10. A $100,000 breakup

The bigger the ring, the bigger the problem.”

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Have this weekly roundup sent to your inbox. Subscribe to MarketWatch’s free Weekly Roundup newsletter. Sign up here.

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Shares of many U.S. semiconductor manufacturers and their suppliers have been hammered over the past week, as investors have learned about the potential effects of President Trump’s trade war with China. But a high level of volatility is customary for chip makers, even as long-term investors have made a lot of money with them in recent years.

Shares of Micron Technology

MU, +0.53%

 dropped 15% last week, making it the worst performer among the 30 stocks in the PHLX Semiconductor Index

SOX, +0.65%

Micron projected lower-than-expected sales and earnings, saying one of the factors was Trump’s move to apply tariffs on another $200 billion in goods imported from China annually.

The jury is out as to whether Micron’s negative surprise signals an industry downturn or a short-term setback. But analysts aren’t happy. Then again, analysts base their stock ratings on 12-month price targets. That is not a long period for serious long-term investors, and the outperformance of semiconductors has been a long-term story. Impatient investors can easily lose their shirts with this group.

Also see: Where is the bottom for Micron stock and earnings as memory market fizzles?

Outperformance and volatility

This chart shows the total return of the PHLX Semiconductor Index over the past five years against the S&P 500 Index

SPX, +0.00%

:

FactSet

That’s very impressive outperformance, and as we’ll show below with sales and earnings figures, it’s really not much of a surprise. But the next two charts show how patient long-term investors had to be to enjoy those gains:

FactSet

Once again, tremendous outperformance. But you can see that semiconductor stocks have not been moving in a straight line.

The charts above show total returns with dividends reinvested. This next action shows price action only for the PHLX Semiconductor Index over the past 12 months:

FactSet

One way to invest in the 30 companies of the PHLX Semiconductor index as a group is the iShares PHLX Semiconductor ETF. An ETF that takes a somewhat different approach is the VanEck Vectors Semiconductor ETF

SMH, +0.55%

which tracks the MVIS US Listed Semiconductor 25 Index.

Over the past year, the PHLX Semiconductor Index has risen 20%, excluding dividends. But during that period, there have been several peaks and valleys:

• From the close on Nov. 24 through Dec. 14, the index declined 8%.

• From the close on Jan. 23 through Feb. 8, the index fell 13%.

• From the close on March 12 through April 6, the index dropped 12%.Then, following a 7% rally through April 17, the index decreased 8% through April 30. That added up to a 14% drop from March 12 through April 30.

• From the close on June 6 through July 3, the index was down 11%.

We could go on, but you probably get the point. The increase in demand for computer chips and memory as more and more devices are interconnected is a long-term story. Semiconductor companies as a group are booking tremendous increases in sales and earnings, but investors who play the group either have to be excellent short-term market timers or the patient type who can hold on for several years.

Estimates and valuation

Here are projected weighted earnings and sales increases for the PHLX Semiconductor Index through 2020, based on estimates from analysts polled by FactSet:

Projected increases in earnings per share
2018 2019 2020
PHLX Semiconductor Index 25.3% 6.5% 6.9%
S&P 500 Index 21.8% 10.1% 9.8%
FactSet
Projected increases in sales
2018 2019 2020
PHLX Semiconductor Index 14.8% 5.6% 8.8%
S&P 500 Index 8.6% 5.0% 4.6%
FactSet

It’s pretty clear that analysts expect lower profit margins to put a drag on semiconductor companies’ earnings growth over the next two years. We’ll see.

In the meantime, the profit bounce from the massive cut in federal income tax rates for U.S. companies is playing a major part in this year’s big increase in profits. That has caused price-to-earnings ratios based on earnings estimates for the following 12 months to decline to 14.5 from 15.8 a year ago for the PHLX Semiconductor Index, while the forward P/E for the S&P 500 has declined to 16.9 from 17.8.

It’s interesting to see that even after many years of faster earnings and sales growth, along with overall outperformance for the stocks, there are enough nonbelievers out there to keep the semiconductors as a group quite cheap relative to the benchmark index. Short-term volatility puts a clamp on valuations even though the long-term story obviously favors the semiconductor manufacturers and their suppliers.

2018 performance

Here’s how the 30 companies in the PHLX Semiconductor Index have performed this year:

Company Ticker Total return – 2018 through Sept. 21 Total return – Sept. 14 through Sept. 21 Total return – Aug. 31 through Sept. 21
Advanced Micro Devices Inc.

AMD, -5.22%

202% -5% 23%
Broadcom Inc.

AVGO, +0.11%

-1% 6% 14%
Integrated Device Technology Inc.

IDTI, +0.23%

58% 0% 11%
Qualcomm Inc.

QCOM, +0.45%

18% -2% 8%
Xilinx Inc.

XLNX, +0.34%

19% 1% 1%
Taiwan Semiconductor Manufacturing Co. ADR

TSM, -1.34%

14% -1% 1%
Skyworks Solutions Inc.

SWKS, +0.86%

-2% 5% 1%
Maxim Integrated Products Inc.

MXIM, +0.07%

16% 3% -2%
Qorvo Inc.

QRVO, +2.90%

18% 4% -2%
Texas Instruments Inc.

TXN, +0.00%

7% 4% -2%
Intel Corp.

INTC, +3.07%

3% 2% -4%
Microchip Technology Inc.

MCHP, +0.38%

-5% -1% -4%
Silicon Laboratories Inc.

SLAB, +0.71%

6% -1% -4%
Analog Devices Inc.

ADI, +0.30%

8% 2% -4%
Nvidia Corp.

NVDA, +5.09%

36% -5% -6%
Teradyne Inc.

TER, -0.43%

-8% 2% -7%
Cypress Semiconductor Corp.

CY, +0.69%

6% 3% -7%
Mellanox Technologies Ltd.

MLNX, +0.89%

19% 0% -8%
Applied Materials Inc.

AMAT, +0.78%

-22% 1% -8%
ASML Holding NV ADR

ASML, -0.38%

9% 2% -8%
Marvell Technology Group Ltd.

MRVL, +3.15%

-12% -1% -9%
Cirrus Logic Inc.

CRUS, +1.02%

-23% 0% -9%
Lam Research Corp.

LRCX, +0.75%

-14% 1% -9%
SMART Global Holdings Inc.

SGH, -0.62%

-11% -1% -10%
MKS Instruments Inc.

MKSI, -0.37%

-11% 0% -10%
KLA-Tencor Corp.

KLAC, +0.79%

1% 0% -10%
ON Semiconductor Corp.

ON, +1.04%

-9% -4% -10%
Monolithic Power Systems Inc.

MPWR, -0.62%

19% -4% -11%
Entegris Inc.

ENTG, +0.87%

-1% -2% -12%
Micron Technology Inc.

MU, +0.53%

9% 1% -15%
Source: FactSet

You can click on the tickers for more information, including news, price ratios, financials, estimates and charts.

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Shares of most homebuilders have taken it on the chin this year, despite the housing shortage in so many parts of the U.S. But valuations for the group are very low, and several homebuilders are expected to show double-digit earnings increases in 2019 and 2020.

It’s easier to understand the decline if you look at a five-year chart of the S&P 1500 homebuilding subsector:

FactSet

There are 13 stocks in the S&P 1500 homebuilding subsector. (The S&P 1500 Composite Index is made up of the S&P 500 Index

SPX, +0.00%

the S&P Mid-Cap 400 Index

MID, +0.34%

 and the S&P 600 Small-Cap Index

SML, +0.41%

)

The homebuilders as a group had an incredible total return of 76% in 2017, so maybe it should not be much of a surprise that the group is down 21% this year through Sept. 25.

Now the question is whether investors are looking at an opportunity to scoop up shares of homebuilders at cheaper prices. The massive cut in federal corporate income tax rates is expected to help lead to a 44% increase in weighted earnings per share this year for the S&P 1500 homebuilding subsector, based on consensus estimates among analysts polled by FactSet. Analysts expect the group’s earnings to increase by 18% in 2019.

Meanwhile, the combination of a decline in share prices for most of the homebuilders and the spike in earnings has driven valuations lower. The forward price-to-earnings (P/E) ratio for the homebuilders, based on weighted earnings estimates for the next 12 months, is 8.7. That is down from 12.5 a year earlier — well before the tax cuts were signed into law by President Trump. In comparison, the S&P Composite 1500 Index trades at a forward P/E of 16.9, down from 17.7 a year earlier.

There are signs that the U.S. housing market is nearing a tipping point. Home-price increases have decelerated, according to the latest S&P CoreLogic Case-Shiller data.

A considerable drop in demand for housing would, of course, hurt homebuilders. But for now, prices are still rising, and new-home sales are increasing at a good clip, while data for housing starts and building permits are mixed.

If you believe that the U.S. economy will continue on its growth course for several more years, this could be a good entry point for homebuilder stocks.

Data

Here’s how the 13 stocks in the S&P 1500 homebuilding subsector have performed, sorted by how well they have done this year:

  Ticker Total return – 2018 through Sept. 25 Total return – 2017 Total return – 3 years Total return – 5 years
Cavco Industries Inc.

CVCO, +0.46%

66% 53% 263% 338%
M.D.C. Holdings Inc.

MDC, +0.24%

-2% 39% 39% 35%
D.R. Horton Inc.

DHI, +0.84%

-15% 89% 45% 124%
Meritage Homes Corp.

MTH, -0.99%

-18% 47% 10% -3%
KB Home

KBH, +0.29%

-21% 103% 77% 44%
PulteGroup Inc.

PH, -1.38%

-21% 83% 36% 62%
Lennar Corp. Class A

LEN, -0.83%

-23% 50% -1% 39%
TRI Pointe Group Inc.

TPH, -1.67%

-25% 56% -5% -7%
Toll Brothers Inc.

TOL, -1.55%

-26% 56% -1% 8%
M/I Homes Inc.

MHO, -0.95%

-27% 37% -1% 21%
NVR Inc.

NVR, -2.85%

-27% 110% 61% 173%
LGI Homes Inc.

LGIH, -1.98%

-33% 161% 75% N/A
William Lyon Homes Class A

WLH, -1.00%

-42% 53% -26% -17%
S&P 1500 homebuilding subsector -21% 76% 29% 65%
S&P Composite 1500 Index 11% 21% 60% 90%
Source: FactSet

For three years, only four of the homebuilders have had total returns exceeding that of the S&P 1500 Composite Index. For five years, only three have beaten the index.

Here are sales growth numbers and projections, with the list sorted by increases in quarterly sales for the most recently reported periods:

  Ticker Increase in sales – most recent reported quarter from year earlier Increase in sales per share – most recent reported quarter from year earlier Expected sales increase – 2018 Expected sales increase – 2019 Expected sales increase – 2020
Lennar Corp. Class A

LEN, -0.83%

67% 19% 64% 14% 3%
TRI Pointe Group Inc. TPH 35% 38% 15% 5% 9%
LGI Homes Inc. LGIH 30% 20% 23% 23% 26%
Toll Brothers Inc. TOL 27% 43% 21% 12% 3%
PulteGroup Inc. PHM 27% 34% 18% 7% 11%
William Lyon Homes Class A WLH 23% 19% 26% 8% 20%
M/I Homes Inc. MHO 22% 29% 16% 7% N/A
Cavco Industries Inc. CVCO 19% 18% 10% 9% 9%
D.R. Horton Inc. DHI 17% 16% 16% 12% 7%
NVR Inc. NVR 16% 17% 15% 7% 2%
M.D.C. Holdings Inc. MDC 16% 15% 18% 7% 6%
Meritage Homes Corp. MTH 9% 14% 11% 4% 6%
KB Home KBH 7% 5% 6% 8% 10%
Source: FactSet

We have also included increases in quarterly sales per share, because this reflects dilution to the share count caused by the issuance of shares for any reason, as well as the boost from net share buybacks. Lennar

LEN, -0.83%

 issued a large amount of new shares when it acquired CalAtlantic in February, so the per-share figure is more useful and the projected sales growth number for 2018 is distorted.

Looking out to 2019 and 2020, the only company expected by analysts to post double-digit increases in revenue for both years is LGI Homes

LGIH, -1.98%

Rather than compare earnings results from a year earlier (because any quarter’s earnings numbers can be skewed by one-time events or accounting adjustments), here are earnings-per-share projections based on analysts’ projections and a comparison of forward price-to-earnings ratios from a year ago. The list this time is sorted by projected EPS growth in 2019:

  Ticker Projected change in EPS – 2018 Projected EPS increase – 2019 Projected EPS increase – 2020 P/E P/E – one year ago
KB Home KBH -7.1% 84.3% 15.0% 8.4 11.3
Lennar Corp. Class A LEN 43.7% 43.0% 5.7% 8.2 11.1
William Lyon Homes Class A WLH 123.8% 19.7% 32.3% 5.8 8.7
LGI Homes Inc. LGIH 36.4% 19.4% 20.9% 7.3 10.1
D.R. Horton Inc. DHI 43.3% 18.5% 4.8% 9.5 12.6
Cavco Industries Inc. CVCO 12.4% 15.0% 17.0% 36.7 29.3
Toll Brothers Inc. TOL 45.5% 11.1% 4.9% 7.1 12.1
M/I Homes Inc. MHO 67.7% 9.7% N/A 6.1 8.2
NVR Inc. NVR 55.2% 9.0% -0.2% 12.6 20.0
TRI Pointe Group Inc. TPH 50.5% 7.1% 11.4% 7.6 8.7
Meritage Homes Corp. MTH 65.5% 4.9% 6.1% 7.5 10.5
M.D.C. Holdings Inc. MDC 52.6% 3.8% 3.2% 8.1 12.7
PulteGroup Inc. PHM 158.3% 3.6% 11.6% 7.1 10.6
Source: FactSet

Again, the P/E ratios are based on consensus earnings estimates for the next 12 months.

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Monzo has won over an increasing number of plaudits, and customers, since setting up business in 2015.

And now the start-up challenger bank has topped LinkedIn’s “Top 25 U.K. Start-Ups” rankings for the second-year running.

Other companies in the financial sphere to make the list’s top 10 include Revolut and ClearBank.

To be eligible, businesses must be no older than seven years, have at least 50 employees and be privately held.

To compile its top start-ups, LinkedIn analyzed the actions of its 550 million-plus users, to distinguish the level of employee growth a company has, along with jobseeker interest, engagement and ability to attract top talent from popular firms featured on its top companies list.

CNBC takes a look at which start-ups have charmed the U.K.’s labor force this year and scored a place in LinkedIn’s top 10.

10. Talentful

Global Headcount: 65+
Headquarters: Soho, London

Talentful was set-up in 2015 to help companies who want to scale up and improve their hiring strategies. Its clients have included Trainline, King.com and Amazon’s Audible.

With its own group of skilled workers and a determination to redefine recruitment, Talentful knows what it takes to hire the right employee, so those who want a job at the firm will need to be prepared. Perks at its London office include subsidized gym membership and flexible working hours.

9. Blockchain

Global Headcount: 100+
Headquarters: London

One of the “most trusted and fastest-growing” crypto companies, cryptocurrency wallet provider Blockchain aims to help people and institutions access cryptocurrencies in a simple, yet secure manner. Since launching in 2011, Blockchain has enticed several investors including Virgin and Google Ventures, and currently operates in 140 countries and hosts 28 million-plus wallets.

Inside the start-up, London staff are entitled to perks such as a catered team lunch three times each week, flexible work schedule and an “unlimited vacation policy” that allows employees to “take time when you need it”.

8. Charlotte Tilbury Beauty

Global Headcount: 750+
Headquarters: London

Following more than two decades in the fashion and beauty business, in 2013 Charlotte Tilbury established her own eponymous brand that offers consumers products that focus on skincare and make-up. It has millions of social media followers and several celebrities model her products, including Kate Moss, Penelope Cruz and Nicole Kidman.

For those interested in a role at the company, the brand looks for those want to “challenge the status quo of the beauty industry.”

7. Improbable

Global Headcount: 300+
Headquarters: London

Founded in 2012, tech group Improbable has a mission to “power previously unmakeable games and answer previously unanswerable questions.” It has created SpatialOS, a cloud-based platform that enables developers to construct, run and operate online games without the limits of traditional server architectures. Improbable aims to hire people who want to make an impact and create “extraordinary things.”

Some of the firm’s key corporate values include relentless humility, improvement over comfort and aiming for the impossible.

6. DAZN

Global Headcount: 500+
Headquarters: London

An on-demand streaming service set-up in 2015 to provide sports fanatics with affordable access to sport at any location and at any time, DAZN features some 20,000 live events annually.

Currently, the product is available in a handful of countries including Switzerland, Canada and Japan — but not in the U.K., despite being headquartered in London — and runs on connected devices including smartphones, tablets and game consoles. In August, the group signed its first global ambassador, soccer star Cristiano Ronaldo, to promote the brand.

5. Skinnydip London

Global Headcount: 250+
Headquarters: London

With the brand’s products located across London brick-and-mortar stores, as well as online, Skinnydip is all about “fast fashion,” with an in-house design department promoting new styles frequently to ensure customers have access to the latest trends. Since founding its business in 2011, the retailer currently offers consumers a range of products, including bags, jewelry, eyewear and phone cases.

It is popular with those on social media, with Skinnydip’s Instagram account alone boasting over half a million followers.

4. ClearBank

Global Headcount: 150+
Headquarters: London

Since the idea of the company was setup in 2014, ClearBank® is the U.K.’s fifth clearing bank and the first new one in over 250 years. It aims to disrupt the traditional system by using cloud-based technology process payments faster, more efficiently and cost-effectively. Its office lies in the heart of London’s financial district inside the 30 St Mary Axe commercial skyscraper, informally known as “The Gherkin.”

Workplace perks include pension and medical programs, and employee discounts.

3. Revolut

Global Headcount: 400+
Headquarters: London

Fintech start-up Revolut currently serves more than 2 million people with offerings including current accounts, free international money transfers and money management technology. Since launching in 2015, it has executed over 150 million transactions.

Revolut has offices in cities including London, Singapore, New York and Moscow, and describes its teams as “special forces” who identify opportunities, strategize, execute and deliver. Staff in its London office have access to free dinners, a private pension plan and free premium subscriptions to its products.

2. Gymshark

Global Headcount: 150+
Headquarters: Solihull, West Midlands

Seen as one of the fastest-growing fitness apparel and accessories brands, Gymshark is devoted to bringing effective, innovative performance wear to its customers in 131 countries.

The sporting goods group was founded in 2012 and seeks employees who are “fearlessly progressive and consistently future-conscious,” offering positions in several areas, including apparel, marketing and operations. While having a love for sport and staying healthy is important, Gymshark looks to employ “visionaries” who can engage with customers.

1. Monzo Bank

Global Headcount: 300+
Headquarters: London

Monzo has gained more than a million U.K. customers since it opened in 2015 and shows no signs of slowing down. With hopes to expand internationally, the digital bank offers customers an alternative to traditional banking with an easy-to-use mobile app, no added costs – to an extent – when using a credit card abroad and instant notifications of personal expenditure.

Monzo employees are entitled to a host of benefits, including the opportunity to select their own equipment, do in-office yoga and pilates, have a catered lunch twice a week, and receive a salary review every six months. Plus, on top of an annual 32 vacation days, staff can take an extra month of unpaid leave to pursue personal projects.

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Elon Musk is being sued by the SEC

Elon Musk is being sued by the SEC

Perhaps no chief executive is more inextricably linked to his company as Elon Musk is to Tesla. But Musk’s future at the helm of the electric car company was thrown into question when the SEC sued him on Thursday.

The SEC claims Musk misled investors on August 7 when he tweeted he had secured funding to take Tesla private at $420 a share, causing Tesla’s stock to soar. He had not secured the funding, the SEC alleges.

The regulator wants a federal judge to ban Musk from serving as an officer or director of any publicly traded company. Musk said in a statement that the SEC’s suit is “unjustified.”

Analysts and experts told CNN the SEC lawsuit brings a scourge of uncertainties to Tesla (TSLA), which is already grappling with intense business pressure. Tesla’s stock dropped about 14% Friday.

Telsa without Musk

Wall Street analysts are nervous about the prospect of Tesla without its founder in the driver’s seat. The SEC’s civil complaint made a pretty “straightforward” case that Musk violated securities law, according to Lee Richards, a former securities law prosecutor and founding partner of Richards Kibbe & Orbe LLP.

Garrett Nelson, an analyst with CFRA, downgraded Tesla’s stock to a “sell” rating on Friday. He argues even the threat of Musk’s departure should be a deal breaker.

“Without a doubt we think [Musk leaving] would be a negative. We think he’s a genius. He’s a visionary” Nelson said.

The company doesn’t spend any money on advertising, and it often relies on Musk’s wildly popular social media accounts to get news out. Product updates are frequently dispatched from his Twitter account, which has 22.7 million followers.

Not everyone is put off by the idea of a post-Musk Tesla. Tesla is “still a powerful brand on its own,” said Karl Brauer, executive publisher of Kelly Blue Book and Autotrader.

“Elon’s presence at the top of the company isn’t required to maintain Tesla’s brand equity,” he said.

Apple survived without Steve Jobs, Brauer noted. Tesla can do the same.

Musk’s departure from Tesla isn’t imminent. He will be allowed to retain his role and titles at Tesla until the SEC suit is decided or settled. That could take a year or longer, two former SEC officials told CNN.

What if Musk stays?

This is only the latest, albeit the most severe, in a series of controversies Musk has drawn in recent months. His other troublesome antics have included firing off late-night tweets, brushing off analysts’ questions during an earnings call, disparaging a man who helped rescue boys trapped in a Thai cave, and sparring with his critics on social media.

He’s facing a defamation lawsuit from the Thai cave rescuer and shareholder lawsuits about his claim he secured funds to take Tesla private. The company confirmed earlier this month said that the Department of Justice is carrying out its own criminal investigation. That could result in Musk facing fines or jail time.

But Musk’s ouster isn’t certain.

Despite all the negative headlines, Tesla’s board of directors said Thursday they “are fully confident in Elon, his integrity, and his leadership of the company.”

Doug Davison, a partner at Linklaters and former SEC official, pointed out that billionaire investor Mark Cuban successfully fought insider trading charges from the SEC a few years back.

Even if Musk is found guilty, Richards, the former prosecutor, said Musk can look to argue that he sent the tweets without much forethought. That could help him get a leaner punishment, and potentially avoid a ban on corporate leadership or lessen it to a few years.

And there is a loophole: If Tesla were to secure the funds to take the company private, Musk could stay on as chief executive because the SEC can only bar him from leadership roles at publicly traded companies, Davison said.

If the company stays public, however, Musk could be forced to take a back seat role or exit the company entirely. That might not be the worst thing for Tesla, Autotrader executive analyst Michelle Krebs said.

“I personally think what should happen is the board should be proactive and move him to a more visionary role and move other people into roles of actually operating the company,” Krebs said.

Tesla has always had its share of detractors. Its stock is one of the most heavily shorted on Wall Street, which means a lot of people are essentially betting against the company.

But Krebs said most “investors and consumers probably want him to stay.”

And if he does hang on to control, Tesla’s best move would be to “beef up the bench and the board with people who are not just rubber stampers.” In other words, Tesla needs people who will keep Musk in check.

Model 3, cash burn and competition

Whoever runs Tesla will oversee some serious problems.

Tesla has racked up a massive debt load as it’s poured money into mass production of the Model 3, the company’s first car intended for a mainstream market.

Tesla claims it does not have a cash crunch, but several analysts told CNN they predict the company will need to raise money to right itself and pay off bills. Lenders could be reluctant to throw money at Tesla when the chief executive is facing a potentially lengthy court battle.

Meanwhile, Tesla is about to face some competition in the luxury electric vehicle market. Established automakers including Audi, BMW and Mercedes are making big plays for the market.

092818 elon musk future tesla gfx

“There are fabulous electric vehicles slowly but surely coming to market,” said Kelly Blue Book’s Brauer. “And that only is going to make the atmosphere and the market circumstance” more uncertain.

Investors hate uncertainty.

“Investing in Tesla equity and bonds over the past few weeks has been a game of choose your own adventure,” Cowen analyst Jeffrey Osborne said in a note after the SEC’s announcement. “Investors are concerned that this is just the beginning and there is a ‘black box’ of outcomes from here.”

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Here's why quitting Facebook is so hard

Here’s why quitting Facebook is so hard

Sheryl Sandberg, Mark Zuckerberg and me. And there’s a good chance you, too.

Welcome to a not-so-exclusive club: Facebook users who may have been affected by a major security breach.

Hackers may have gained access to nearly 50 million accounts by exploiting flaws in the social network’s code, Facebook said Friday. It’s the largest breach in the company’s history.

Facebook says it has notified law enforcement officials and patched the code vulnerability that hackers exploited.

A lot of questions remain. We don’t know for sure whether the impacted accounts were misused. It’s also unclear exactly what information hackers may have accessed, though Facebook said passwords and payment information were not compromised.

“So far, our initial investigation has not shown that these tokens were used to access any private messages or posts or to post anything to these accounts,” CEO Mark Zuckerberg told reporters Friday. “But this, of course, may change as we learn more.”

Cybersecurity experts tell CNN there are some vital steps you can take to better protect your data.

What are tokens?

The attackers were able to use accounts as if they were their own by stealing “access tokens.” Tokens keep users logged into their Facebook accounts over long periods of time without having to re-enter a password.

Facebook said Friday that it reset all 50 million tokens, as well as tokens for an additional 40 million people as a “precautionary step.”

And there may be more to come. Facebook said an investigation into the breach has only just begun.

“If we find more affected accounts, we will immediately reset their access tokens,” the company said in a blog post.

Check if you were affected

Users that were logged out of their accounts can log back in using their usual passwords. They will then see a banner on top of their news feed that reads: “An important security update.” It offers a link that gives you some details about the breach.

Even if you’re not one of the 90 million, Facebook suggested you log out of you account, as a “precautionary” step. That will reset your access tokens.

You can do so from a desktop computer by clicking the arrow in the top right menu bar of your screen, selecting “Settings,” and then navigating to the “Security and Login” tab.

On Facebook’s iPhone mobile app, tap the bottom right corner of the screen, scroll down, and tap “log out.”

Change your password

Facebook says access tokens, not passwords, were stolen. But Bruce Schneier, a top cybersecurity expert and fellow at the Harvard Kennedy School, said it’s wise to take this step anyway.

You can start this process from the “Security and Login” tab on your “Settings” page.

Schneier also recommends turning on two-factor authentication.

When it’s activated, users are required to input a code at the time of login. You can choose whether you want to receive the code via text message or through a separate authentication app.

To turn on two-factor authentication, use the “Security and Login” page.

Log out of other devices

After I reset my password, Facebook prompted me to review which devices had access to my account. I hit “Log out of other devices,” which included my current iPhone and another device I haven’t owned since 2014.

Experts said to check where you’re logged in on a regular basis. You can access this info on Facebook’s “Security and Login” page.

Other apps

Facebook said it automatically unlinked potentially affected accounts from Instagram and Oculus, both of which are owned by Facebook. It did not do so with WhatsApp, which the company said was not impacted.

Facebook’s vice president of product management, Guy Rosen, told reporters Friday that it wasn’t clear if hackers were able to gain access to third-party apps that use Facebook login, but couldn’t rule it out.

A wide range of sites use that feature, including payment apps like Venmo.

“It’s important to say: The attackers could use the account as if they are the account holder,” Rosen said.

Experts say it’s a good idea to reset all your passwords for apps that were linked to Facebook login anyway.

Kevin Mitnick, a former hacker who founded cybersecurity consulting firm Mitnick Security, said he recommends using long, complex passwords and storing them with a password manager such as 1Password or KeePass. He says your primary password should be long. “Over 25 characters,” he said.

You can check which external apps you have authorized on Facebook’s “Settings” page under the “Apps and Websites” tab.

Schneier, the cybersecurity expert, said if you can stand to remember a few more logins and passwords, it’s a good idea to unlink Facebook from all of them.

CNN has reached out to a variety of companies that use Facebook login. TripAdvisor and Ancestry are the only sites that responded to inquires. Both companies said there was no evidence user info was compromised.

Beef up security

Kevin Fu, a cybersecurity expert and associate professor at the University of Michigan, recommends Facebook users get alerts for “unrecognized logins.”

Users can turn on the feature on the “Security and Login” page. Scroll down to the “Setting Up Extra Security” section. Facebook will send you an email if someone uses your information to log in on a device you don’t typically use.

Know your risks

It’s wise to trash anything on your Facebook profile you don’t want out in the open, experts say. Go through old messages, photos, and posts — and start deleting.

Schneier, the Harvard Kennedy School lecturer, said if you are online, it’s best to always be cautious about what you share.

“You are completely at their mercy, and you have to hope for the best,” he said. And that’s true of any tech firm you share information with.

Call Congress

Schneier said the best thing for people to do is “agitate for better laws.”

“This kind of stuff happens all the time,” he said. “The reason companies get away with this nonsense is they don’t have to do better.”

— CNN’s Donie O’Sullivan, Laurie Segall and Heather Kelly contributed reporting.

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Elon Musk neutral expression

Elon Musk agreed Saturday to step down as chairman of Tesla and pay a $20 million fine in a deal to settle charges brought this week by the Securities and Exchange Commission.

Under the settlement, which requires court approval, Musk will be allowed to say as CEO but must leave his role as chairman of the board within 45 days. He cannot seek reelection for three years, according to court filings.

He accepted the deal with the SEC “without admitting or denying the allegations of the complaint,” according to a court document.

The SEC alleged on Thursday that Musk misled investors when he tweeted on August 7 that he had secured funding to take Tesla private at $420 a share, causing Tesla’s stock to soar. He had not secured the funding, the SEC said.

Separately, Tesla agreed Saturday to pay $20 million to settle claims it failed to adequately police Musk’s tweet.

Tesla did not immediately reply to CNN’s request for comment.

This is a breaking story and will be updated.

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Leland Char is a 28-year-old product manager for a large San Francisco–based tech company. He loves the Bay Area’s “very authentic Asian food and New American cuisine, smart, well-educated people, the multiple job opportunities, the friends that I’ve made, and fantastic hiking.”

What Char hates is the house prices, and the fact that, even with dual incomes, he and his fiancée can scarcely afford to buy a home in their community, let alone have in-laws join them as they put down roots.

So he settled on a solution that’s unorthodox, but which suits him: He bought eight houses in Texas.

He’ll continue to rent in San Francisco, and has leased out the far less expensive properties in Texas, expecting to reap a better return than he could from stocks or bonds, while also building equity.

Char, who built extensive spreadsheet models with all kinds of scenarios to test assumptions, doesn’t see a contradiction in becoming a “first-time homeowner” of a property he may never set foot in. Like a good tech worker, he found a way to make his investments online, using a fintech startup called Roofstock.

Launched in late 2015, Roofstock is one of the leading platforms for the burgeoning market in single-family-house rentals for long-distance investors. While there have been landlords for as long as there’s been property, this particular market moved in a different direction in the aftermath of the housing crisis, when large institutional investors like Blackstone began scooping up houses by the thousands at fire-sale prices in order to rent them out.

‘It’s great to bring technology to bear on those challenges of owning property thousands of miles away, but it does boil down to making sure you can trust those boots on the ground.’


Daren Blomquist, Attom Data Solutions

Now a new crop of individuals, like Char, are eyeing the big players’ business model and adapting it to their circumstances. Rather than trying to swing the purchase of an expensive home by renting out the basement, or pursuing an extra income stream by buying and renting out a nearby property, platforms like Roofstock, HomeUnion and Investability make it possible to research, purchase, finance, lease out and manage rental properties, regardless of geographical locations, with just a few clicks. For many investors, those properties are thousands of miles away, where prices for many investors are vastly lower, rental demand for houses is constant, and, in many cases, courts and regulations tend to side with landlords, not tenants.

The business model has a lot of merit, and Char told MarketWatch he’d had “a great experience” and would recommend Roofstock to others. Still, like many new investment propositions, it also carries risk. Some industry observers wonder if novice investors, especially those who may not have clear memories of the housing crash, are really prepared for possible downsides. And a decade after the crisis, others question whether the overall housing market can withstand another deluge of investors whose interest is detached from the communities in which their money is being put to work.

Read: Forget flipping houses — these retail investors flip mortgages

Daren Blomquist has watched plenty of new ventures spring up in the nearly two decades he’s been lead spokesman for real-estate service provider Attom Data Solutions. Blomquist put it this way: “It’s great to bring technology to bear on those challenges of owning property thousands of miles away, but it does boil down to making sure you can trust those boots on the ground and those eyes and ears in that market to be working in your best interest. It’s going to take time for platforms like Roofstock to establish that trust with buyers. I think technology can go a long way but hasn’t been fully proven yet in my mind.”

A few minutes browsing on Roofstock.com gives a sense of what Blomquist means by “technology can go a long way.” On a recent morning, 322 properties were available for sale. Clicking on any one shows the precise address as well as a treasure trove of data: results of an inspection, tenant occupancy and current rental payment information, a Roofstock reckoning of the quality of the neighborhood, and more. And there are extensive assumptions, all of which can be fiddled with: property taxes, property management fees, repairs and maintenance set-asides, and more.


Roofstock doesn’t own any of the properties on its site. It brokers them for a 2.5% fee — much cheaper than the standard 6% that most real-estate agents charge. (Buyers also pay a 0.5% fee.) But more important to sellers may be the fact that the platform enables quick, seamless sales that don’t disrupt cash flow from tenants already living in the homes.

HomeUnion, Altisource’s Investability and OwnAmerica offer similar — but less robust — online data about their properties, one reason Blomquist labeled Roofstock “the most mature” of the platforms.

And while Blomquist offered healthy skepticism about the model, arguing that out-of-town investors should always visit the areas in which they’re thinking of buying and get their own independent third-party inspection, he also sees a big benefit to having larger, more prominent firms taking a leadership role in this marketplace, he said. “Where we hear horror stories is with small regional players.”

Consider this recent exchange in the online real-estate chat room Bigger Pockets, in which a California resident wrote about a “Turnkey nightmare with Morris Invest.” The conversation generated over 200 responses, many of them echoing stories of subpar work on the part of Morris Invest, the fix-and-flip company founded by former “Fox and Friends” host Clayton Morris. (Morris Invest did not respond to a MarketWatch request for comment.)

“I do think the benefit of having a name brand out there is that there is some credibility at stake,” Blomquist told MarketWatch. “I think that they’re trying to avoid those worst-case scenarios.”

Also read: California exodus gathers strength, as home prices continue upward march

So far, Char hasn’t had anything close to a “worst-case scenario.” Still, since closing on his properties late last year, he said he’s faced around $20,000 of unexpected expenses, including remodeling, HVAC upgrades and plumbing. He is trying to get a sense of how many of those expenses may recur and which were simply one-time needs.

He’s also trying to decide how comfortable he should be with his current property manager, or whether he should look for a new one.

One of Roofstock’s pitches is that its buying power enables it to negotiate with individual property managers around the country, bringing a level of professionalization and transparent pricing to a business that’s the epitome of local, low-tech and reactive.

Both steps demonstrate how much care Char is putting into the process — but also serve as a reminder that an investment marketed as “passive” may require a lot more effort than may be apparent from financial model spreadsheets.

Still, Roofstock CEO Gary Beasley said he believes that robust tenant demand for single-family rentals means investors like Char are in the catbird seat, notwithstanding short-term bumps in the road. He described buying an investment property for himself, as one of the first purchases made on Roofstock. The tenants moved out a couple of months after he closed, Beasley said. It was leased again shortly after, for $250 more per month.


“I was able to turn it from a good investment to a really good one, but when I first got the notice that the tenant was going to move out, I was not happy,” Beasley said.

But it’s worth noting that many, if not most, investors have financial profiles more similar to that of a tech worker than that of a tech CEO. What’s more, while Beasley argued that Roofstock builds ample cushioning into the financial models attached to every property, including an annual 5% “vacancy factor” for every rental, such assumptions may be more reasonable for institutional investors with large portfolios than for a small landlord with a few properties.

Put another way, if Char had bought one house and found himself in the position Beasley did, he would have been out a down payment, several months of mortgage payments and likely some unexpected repair costs, before even collecting a dime from a tenant, a very different outcome than a 5% haircut on expected revenues.

Roofstock says that since inception, the overall gross yield of its properties has been 10.3%.

Still, Blomquist called the vacancy-rate assumption “a big deal,” noting that there are operating expenses, including property taxes, to be paid, even if owners haven’t financed the purchase. For his part, Beasley stressed that the company is very clear with investors that there is “variability in the cash flow.”

Also read: America’s new great migration in search of lower property taxes

“One of the things that’s always been a problem with this kind of real-estate investment is excessive optimism in the assumptions,” said Ellen Seidman, a senior fellow with the Urban Institute’s housing finance policy center. “That’s a problem for investors that may turn into a problem for the tenants if they try to raise rent or cut back on maintenance.”

Seidman, a longtime advocate for fair lending and consumer-oriented approaches to housing, said she doesn’t think out-of-town investors are necessarily detached landlords. One of the benefits of the institutional investor presence in the marketplace may in fact be a higher level of service on maintenance issues, because they have economies of scale that a single landlord can’t match, she said.

MarketWatch reached out to multiple organizations that advocate for tenants and consumers in the housing market, including the National Community Reinvestment Coalition, the National Fair Housing Alliance, the Center for American Progress and Make Room, but all either did not respond or declined to comment, citing a lack of awareness.

Roofstock investors, judging by their blog posts on the website, are cognizant of whether markets in which they invest are considered “landlord-friendly.” Yet in some ways the influence of these platforms on the housing market may be more nuanced than one-sided assumptions about “investor landlords.”

Read: We’re still building the wrong kind of homes for renters

Daren Blomquist has had his eye on Memphis, which has been a hotbed for the turnkey fix-and-flip industry, thanks in part to a local organization that started snatching up homes even earlier than the Wall Street players. MemphisInvest was buying in 2007 and 2008, “when everyone else was running,” as its president, Chris Clothier, said.

Attom’s data show that Memphis is the top market in the country for property flipping. “A high percentage of the flips are sold to cash buyers,” Blomquist said. “What that tells me is there’s this whole flipping industry feeding the single-family rental industry.”

A full 33% of single-family homes are non-owner-occupied in Memphis, Attom’s data show, and, with its home market so saturated, MemphisInvest has started to look elsewhere for opportunities.

As Blomquist put it, “one of the things that I don’t really know the answer to is, is there some kind of unforeseen impact of this ability to buy rental homes across the country very easily, [and] will there be some kind of unintended impact on some markets if conditions change?”

David Lenoir, a county commissioner in Memphis said to take an interest in issues relating to the tenants of the investor-owned rentals, did not respond to requests for comment from MarketWatch.

Read: Realtors will soon be free of 10-year-old Justice Department decree

Beasley argued that single-family house rentals are a safe bet even if the economy or housing market does downshift. “Rents tend to be very sticky downward and don’t drop as much, if at all. In fact, during the recent downturn between 2007 and 2011, prices dropped over 30% nationally, but on average rents for rental homes did not drop at all.” For that reason, rental houses are a great defensive investment, he said.

Still, it’s likely that many investors browsing for investments through marketplaces like Roofstock are searching for offensive plays. And as the real-estate cycle rolls on, and more players crowd into increasingly saturated markets all over the country, another big question is whether investors will find the kind of returns they’re expecting.

Char said he’s estimating returns in the mid-20% range “in terms of internal rate of return,” which is one of several ways of calculating returns on real-estate investments.

“Most people should understand that most of these markets that are good for buying rentals are not going to be good for price appreciation,” Blomquist said. “If you’re in Seattle and you’ve seen prices go up double digits for the past few years, you should not expect that from a Memphis or a Cleveland. It may happen, but that would be icing on the cake. You’re not going to build a lot of equity fast.”

In fact, many homes available on Roofstock offer negative cash flow based on the default assumptions that the company populates in its property descriptions.


Blomquist argued that most of the investment opportunities that are available through platforms like Roofstock may need to be held for as much as 20 years in order to realize any return. People who scooped up properties a few years ago, when prices were at rock bottom, were successful in making their investments a five-year play, he conceded, and it’s possible some investors entering the market now are expecting to duplicate that.

Read: We’re probably at peak housing. Here’s what that means.

“Investors buying now can’t expect to experience such big home-price returns over the next five years,” Blomquist said. “They’re best off holding for the long term to realize the increasing cash-flow returns they should be able to get as rent rates rise over time.”

That’s not even taking into consideration the massive amounts of fresh supply that are hitting the apartment-rental market and making some industry participants nervous. Beasley said that in many of the markets Roofstock serves, occupancy rates are high — in the 90% vicinity — and that single-family tenants stay longer — an average of three years across the industry, roughly double the average tenure of apartment dwellers. And single-family rental dwellers tend to be a different demographic: older, and more families, making it a market separate from the multifamily space, he said.

Despite his unexpectedly rocky start, Leland Char said he’s looking forward to investing again later this year when he receives his bonus. “That’s the way that I triage against being hit in a downturn and upturn, by investing as money becomes available, not trying to time a cycle,” he said. “People are bad at timing markets.”

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Getty Images

Tesla Chairman and CEO Elon Musk.

Just in case you haven’t read enough about Tesla CEO Elon Musk and his woes, here’s a fresh trove of investor indignation. This comes from the online media site the Outline, which says it obtained 147 pages of complaints about Musk from people who’d invested in Tesla

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Shares of the car maker were down about 14% Friday after the Securities and Exchange Commission said it had filed a suit against Musk for tweeting that he was considering taking the company private — and had lined up the financing to do so.

Read: Elon Musk ‘rolling the dice’ and buying time by turning down SEC settlement

But some investors, according to the Outline’s collection, lost even more.

“The Securities Act of 1934 was created to protect small investors like myself,” according to one account. “I had 25% of my retirement account in Tesla puts as a hedge against market downturns. 75% of my portfolio was long. I purchased January 2020 puts so I had time to evaluate information and make sound decisions. Mr. Musk clearly violated this provision multiple times and I turn to the SEC to protect myself and other investors from market manipulators who act outside of the codes of conduct we have established for our industry leaders.”

A “put” is an investment that allows, but does not oblige, the bearer to sell the security back to another entity at a specified price and time.

Read: An assumed ‘Treasury put’ may have doomed Puerto Rico bond investors

Another writer was more poetic, if less precisely spelled. “I have bene a retail stock investor for over 30 years,” the account went. “My faith in the market continues to decline as the small investor is not playing in the same ballpark. The comments from Mr. Musk of TESLA confirms everything that is wrong with todays market.”

Also see: Could Elon Musk’s tweets cause him to lose his job as Tesla CEO? 5 of the costliest tweets ever

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